INTRODUCTION

Compulsory licenses are authorizations given to a third-party by the Controller General to

make, use or sell a particular product or use a particular process which has been patented,
without the need of the permission of the patent owner.

This concept is recognised at both national as well as international levels, with express
mention in both (Indian) Patent Act, 1970 and TRIPS Agreement. There are certain pre-
requisite conditions, given under sections 84-92, which need to be fulfilled if a compulsory
license is to be granted in favour of someone. which need to be fulfilled if a compulsory
license is to be granted in favour of someone.

As per Section 84, any person, regardless of whether he is the holder of the license of that
Patent, can make a request to the Controller for grant of compulsory license on expiry of
three years, when any of the following conditions is fulfilled –

1. the reasonable requirements of the public with respect to the patented invention have
not been satisfied
2. the patented invention is not available to the public at a reasonably affordable price
3. the patented invention is not worked in the territory of India.

Further, compulsory licenses can also be issued suo motu by the Controller under section 92,
pursuant to a notification issued by the Central Government if there is either a "national
emergency" or "extreme urgency" or in cases of "public non-commercial use.

The Controller takes into account some more factors like the nature of the invention, the
capability of the applicant to use the product for public benefit and the reasonability, but the
ultimate discretion lies with him to grant the compulsory license. Even after a compulsory
license is granted to a third party, the patent owner still has rights over the patent, including a
right to be paid for copies of the products made under the compulsory licence1

Section 31 of the Indian Copyright Act also provides for the compulsory licensing of
copyright in case of works that are withheld from the public. In case the copyright owner has
refused to:

i|Page
Republish or allow for the republication of the work or has refused to allow for the
performance of the work in public due to which the work is withheld from the public;

Allow communication of the work to the public by way of a broadcast of such work, or in the
case of sound recording the work recorded in such sound recording on terms which the
complainant considers reasonable,

The Copyright Board can, after providing reasonable opportunity for the owner of the
copyright to be heard and after conducting an enquiry and if satisfied, can direct the Registrar
of Copyrights to grant a compulsory license to the complainant to republish the work,
broadcast the work or communicate it to the public as the case may be. Upon such direction,
the Registrar of Copyrights shall grant the license to the complainant

The primary objective of compulsory licensing is to ensure the availability of copyrighted

material. The Indian Copyright Act grants protection to the works of writers, artists etc. so
that they can benefit from the results of their hard work and creativity. However, this comes
at a price i.e. the work should be available for access and fair use for other individuals. There
are times when copyright owners refuse to part from their work. In such a case, in order to
ensure the availability of copyrighted material to the public and free flow of ideas and
information without infringing the rights of the copyright owner, compulsory licensing
becomes a necessity.

ii | P a g e
 ANALYSING CONSTITUTIONALITY OF COMPULSORY LICENSING IN COPYRIGHT

Section 31(1)(b) and connected Rules 6 to 10 and Section 31D of the Copyright Act as well
as connected Rules 29, 30 and 31 of the Copyright Rules appears to be violative of Articles
14, 19(1)(g) and 21. The impugned provisions would disrupt the long standing mutually
negotiated voluntary license agreements with broadcasters and with the coming of the
impugned provisions, such broadcasters would have no incentive to enter into and/or
continue with the voluntary license agreements with the labels and instead would attempt to
terminate or wriggle out of their agreements with the labels in order to approach the
Appellate Board to have terms convenient to them fixed and imposed upon the labels.

Section 31 (l)(b), as amended by the 2012 Amendment, provides for a system of a

compulsory licensing in respect of copyrighted works if the copyright owner has refused to
allow communication to the public by broadcast of such work or in the case of a sound
recording, the work recorded in such sound recording, on terms which the complainant
considers reasonable, whereby upon a complaint made to the Appellate Board by a
complainant, the Appellate Board may impose, without the consent of the owner, a license
not only in favour of the person making the complaint, but also to any number of other
persons that in the opinion of the Copyright Board are “qualified” to get such a license. The
labels contend that mere refusal by an owner to the terms offered by a license seeker may be
sufficient for the said license seeker to seek a compulsory license against the owner
regardless of the fact that the work may be widely available to the public on completely
reasonable terms. The labels further contend that the Section and connected Rules do not
provide for any system of hearing to the owner qua the grant of the compulsory license by the
Board in favour of any other person, thereby being contrary to the requirement under Article
14. That the impugned section gives unfettered power to the Appellate Board to not only
grant a compulsory license to third parties but also set the terms and conditions of such
license including the terms of royalty rates qua such third parties without requiring the
consent of the owner, thereby depriving the labels of their right to decide whom they wish to
license their content too and rendering exclusivity of an owner’s right redundant.

iii | P a g e
Section 31D deals with statutory license for broadcasting of literary and musical works and
sound recordings. It provides that any broadcasting organization desirous of communicating
to the public by way of a broadcast or by way of performance of a literary or musical work
and sound recording which has already been published may do so subject to the provisions
contained in the section i.e. broadcasting organisation giving  prior notice, in such manner as
may be prescribed, of its intention to broadcast the work stating the duration and territorial
coverage of the broadcast, paying to the owner of rights in each work royalties in the manner
and at the rate fixed by the Appellate Board; Section 31D further provides that the rates of
royalties for radio broadcasting shall be different from television broadcasting and the
Appellate Board shall fix separate rates for radio broadcasting and television broadcasting.

The provisions on statutory licensing appears to unconstitutional, inter alia, on the ground
that they provide for a mechanism of mandatory licensing of copyright work without
providing any say whatsoever to its copyright owner and without providing the copyright
owners an opportunity of being heard, thereby being violative of Article 14, 19(1) (g) and 21
of the Constitution as well as the right to property of the petitioner under Article 300A.
Further that there is no public interest in making film music available to the broadcasters at
subsidized and preferential royalty rates rather than leaving them to negotiate commercial
agreements with copyright owners and that the practical effect of Section 31D is to ensure
commercial profitability of the broadcasters at the expense of the owners of the copyrighted
works.

These provisions take away the incentive from a copyright owner to create original works and
to commercially exploit them to his liking and put fetters on an owner’s right to refuse
exploitation, right to negotiate a suitable rate of royalty for exploitation of his works, right to
choose a licensee and the right to decide the terms and conditions of exploitation of his
works. Further, 31(l)(b) and Section 31D, cause inconsistencies in the provisions of the
Copyright Act, 1957 and take away the exclusivity from the exclusive rights granted to the
owners of copyrighted works.

The copyright owner does not have to be heard each time a compulsory license is granted to
a qualified party pursuant to Section 31(1)(b), it bears noting that the decision to make a
particular piece of work the subject matter of compulsory licenses cannot be made by the

iv | P a g e
IPAB until the copyright owner is given a reasonable opportunity to be heard and until the
IPAB conducts any other enquiry that is necessary for the grant of such a license.

There the author believes that there is no requirement of hearing the copyright owner before
the grant of a statutory license under Section 31D, it is not the case that their interests have
not been duly reflected in the statutory scheme created by the legislature. To illustrate, the
IPAB is empowered to direct a broadcaster to pay part of the royalty amount to the copyright
owner in advance [Section 31D(4)] and the copyright owner has to be heard in the event the
broadcaster decides to alter the copyrighted work for the purpose of broadcast [Section
31D(6)].

v|Page
 COMPULSORY LICENSE FOR PHARMACEUTICALS IN INDIA: BALANCING
THE CONFLICT OF INTEREST

The development of a new drug is a time -consuming and expensive process and the process
to develop superior versions of existing drugs further adds on to the overall R & D
expenditure2. Thus, to combat it one can apply for intellectual property rights (a patent)
protection of their intangible creations. An exclusive right provided by a patent 3protects the
investments made by companies during drug development by preventing other companies
from making the new drug for a fixed period of time 4and by providing incentives to the
creators of new drugs in the form of payments and royalties from other companies for the use
of their creation.5 Patents provide a legal means for pharmaceutical manufacturers and other
patent holders to prevent unauthorized duplication of their products, therefore, patent
protection is critically important to pharmaceutical manufacturers who can charge prices that
are much higher than their basic manufacturing costs to recoup their R&D. 6

Patents provide a legal means for pharmaceutical manufacturers and other patent holders to
prevent unauthorized duplication of their products, therefore, patent protection is critically
important to pharmaceutical manufacturers who can charge prices that are much higher than
their basic manufacturing costs to recoup their R&D costs and earn profits that may be
utilized for further investment in new drug discovery and development.

According to the Utilitarian theory of IPR the promotion and protection of IPR must be
carried out for the objective of ensuring greatest number of people are guaranteed happiness.
Public benefit or social good is the underlying justification that is to be gained by the IPR
regime that aims to benefit both the creators and the innovators in the short term, while
everyone else accrue the benefit in the long run. The monopoly rights conferred upon creators

2
Dr. Shuchi Midha & Aditi Midha,Compulsory License: Its Impact On Innovation In Pharmaceutical Sector, 2
INTERNATIONAL JOURNAL OF APPLICATION OR INNOVATION IN ENGINEERING &
MANAGEMENT 2319 -4847 (2013).
3
According to BLACK’S LAW DICTIONARY, 4th Ed. Rev. , at 1281-82, “Patent Is A Grant Made By The
Government To An Inventor, Conveying And Securing To Him The Exclusive Right To Make And Sell His
Invention For A Term Of Years”
4
Patent protection is provided for 20 years from date of filing of the application, after which the protection ends
and invention enters the market available for commercial exploitation. This period was introduced in second
amendment of Indian Patents Act, 1970, in 2002 to update the patent law in accordance with trips mandates.
5
Dr. Shuchi Midha, Supra n 9.
6
Ruchika Ghosh ,Trips & Pharmaceuticals - Impact On The Developing Countries Post Doha Vis-A-Vis
Developed Nations, 78 SCL 19 (2007).

vi | P a g e
in the reason behind their disclosure of work in the public domain, however on expiration of
such monopoly term the creation is deemed to be in public domain and liable for exploitation
by the public.
The ultimate motive of patents in the pharmaceutical sector is to secure public healthcare.
The world over is facing one major issue of not having access to the essential medicines at
reasonably affordable prices. To combat this, the strategy of granting CL is being resorted to
bring down the prices of drugs and in turn improving access to essential medicines.
Production of generic drugs is carried out without the permission from the patent holder with
the help of CL to ensure availability of medicine at considerably lower prices. Since, the
price of the medicines are ascertained keeping in mind the market realities CL provides social
benefits in the form of enabling access to all essential medicines to a greater part of the
population.7
The right to health being a fundamental right, there is an obligation upon the States to provide
for the same. An important aspect forming a part of the right to health is access to medicines.
CL can be used as an effective tool in order to reduce the cost of medicines and promote
health care provided that the ways must be clearly defined in which it is used and the
governments must resort to granting CL only under procedures established by law and in
exceptional circumstances. Only a rational implementation of CL will ensure that the
technology transfer helps in both the production of medicines as well as securing the health
of the population. Only when the essential life-saving medicines are available to the public
easily, is the objective of protection of public health achieved. This indicates a positive
relationship between issuance of CL for pharmaceutical products with the aim of achieving
public health care.
This has been reaffirmed by the Doha Declaration on TRIPS, which confers upon a nation the
power to grant compulsory licenses during the times of national emergency. 8In a CL, a
government can compel a patent holder who has been granted exclusive right to license to be
used by the state. The TRIPS Agreement by WTO member countries also permits the grant of
compulsory licenses. The provisions of TRIPS allow those underdeveloped third world
countries, which quite often lack the technology to manufacture the medicines, in cases of
pandemic outbreaks and emergencies.
In situations such as these, grant of compulsory licensing seeks to be a balancing act between

7
Dr. Raju KD, Compulsory Licensing Provisions to Deal with Access to Patented Medicines in India,NUALS
Law Journal, Issue 5,Vol.6, p.11-12.
8
Para 5, Ministerial Conference, Fourth Session, Doha, 9 - 14 November 2001, WT/MIN (01)/DEC/2, 20
November 2001

vii | P a g e
public health concerns and exclusive rights. Apparently, TRIPS considers CL as an exception
to the agreement’s minimum requirement provision that mandates all WTO Member States to
allow a patentee the right of exclusivity during the entire patent term. The Doha declaration
has acknowledged the need for granting CL in emergency situations. The European Union
has also legalized the compulsory licensing provision. The Doha declaration provides for the
grant of CL in developed countries for the purpose of manufacture of patented drugs on the
condition that they export it to the least-developed countries and such countries having per-
capita incomes of less than US$745 a year. Ergo, public interest is deemed one of the main
considerations for allowing CL. The provision of compulsory licensing will come into play
with a public health emergency under way as WTO permits countries to purchase from
generics firms or low-cost suppliers.

Grant of Compulsory license holds major challenges. On one had compulsory licenses ensure
the affordability by masses in developing countries but long- term benefits from issuing
compulsory license may be a distant dream. It stems from the fact that licenses should strike a
proper balance between the government (authorizer), compulsory licensee (government,
firm’s private public), and IP owner (unwilling licensor). The debate currently revolves
around the issue that the grant dampens the spirits of owners against further innovative
activity, and/or hurt the motivation of innovation leaders. Patents undoubtedly play a major
role in the health sector. Patents were an incentive for Pharma companies to invest in drug
development. Drug development is an expensive venture that requires millions of dollars
being spent without returns. When a miracle drug is finally produced, patenting and exclusive
manufacturing rights allow these companies to make sufficient profits to justify their previous
investments, as well as to invest in future innovations. The companies selling patented drugs
have an important say in determining their prices and from the point of view of the individual
patients is that patented drugs are usually significantly more expensive than generic drugs.
Given that in developing countries most people are poor and the patent protection can
increase prices, it is necessary to examine with particular care the arguments put forward by
some that patents in developing countries are not likely significantly to affect access to
pharmaceuticals subject to patent protection.

viii | P a g e